Quarterly report pursuant to Section 13 or 15(d)

Segments

v2.4.0.8
Segments
 6 Months Ended
Jun. 30, 2013
Segments [Abstract]  
Segments [Text Block]

(7)       Segments

 

Effective January 1, 2013, we refocused our business and now have two reportable segments, Wireless and Wireline. The Wireless segment's revenue is derived from wholesale wireless services. The Wireline segment's revenue includes all of our other revenue, specifically a full range of retail wireless, data, video and voice services to residential, local, national and global businesses, governmental entities and public and private educational institutions; wholesale data and voice services to other common carrier customers; Internet, data network and managed services to rural schools and health organizations and regulated voice services to residential and commercial customers in 61 rural communities primarily in Southwest Alaska. This change reflects our plan to strategically focus on our wireless network and is how our chief operating decision maker now measures performance and makes resource allocation decisions. Prior to 2013 we had operated our business under five reportable segments – Consumer, Network Access, Commercial, Managed Broadband and Regulated Operations. The historical segment data has been reclassified to conform to the revised reportable segments.

 

Wireless plan fee and excess usage revenues from external customers are allocated between our Wireless and Wireline segments. The Wireless segment records the Cost of Goods Sold related to wireless equipment sales up to an agreed-upon amount after which it is recorded in the Wireline segment. Selling, general and administrative expenses are charged to the Wireless segment based upon a shared services agreement. The remaining selling, general and administrative expenses are charged to the Wireline segment.

 

We evaluate performance and allocate resources based on earnings before depreciation and amortization expense, net interest expense, income taxes, share-based compensation expense, accretion expense, income or loss attributable to non-controlling interests, and non-cash contribution adjustment (“Adjusted EBITDA”). Management believes that this measure is useful to investors and other users of our financial information in evaluating operating profitability as an analytical indicator of income generated to service debt and fund capital expenditures. In addition, multiples of current or projected earnings before depreciation and amortization, net interest expense, and income taxes (“EBITDA”) are used to estimate current or prospective enterprise value. The accounting policies of the reportable segments are the same as those described in Note 1, “Business and Summary of Significant Accounting Policies” of this Form 10-Q. We have no intersegment sales.

 

We earn all revenues through sales of services and products within the United States. All of our long-lived assets are located within the United States of America, except approximately 82% of our undersea fiber optic cable systems which transit international waters and all of our satellite transponders.

 

Summarized financial information for our reportable segments for the three and six months ended June 30, 2013 and 2012 follows (amounts in thousands):

                     
        Three Months Ended   Six Months Ended
    Wireless Wireline Total Reportable Segments   Wireless Wireline Total Reportable Segments
June 30, 2013                
Revenues $ 35,559 154,102 189,661   69,396 306,481 375,877
Adjusted EBITDA $ 14,273 47,866 62,139   29,462 91,326 120,788
                     
June 30, 2012                
Revenues $ 30,360 145,744 176,104   59,804 288,207 348,011
Adjusted EBITDA $ 12,590 46,831 59,421   25,663 88,587 114,250

A reconciliation of reportable segment Adjusted EBITDA to consolidated income before income taxes follows (amounts in thousands):

        Three Months Ended June 30,   Six Months Ended June 30,
      2013   2012   2013   2012
  Reportable segment Adjusted EBITDA $ 62,139   59,421   120,788   114,250
  Less depreciation and amortization expense   (34,396)   (33,350)   (68,395)   (65,730)
  Less share-based compensation expense   (1,647)   (865)   (2,906)   (2,595)
  Less non-cash contribution expense   -   (160)   -   (960)
  Less net loss attributable to non-controlling interests   (197)   (177)   (397)   (354)
  Plus net loss (income) attributable to equity investment   (49)   (84)   (53)   47
  Less accretion expense   (155)   (152)   (282)   (340)
    Consolidated operating income   25,695   24,633   48,755   44,318
  Less other expense   (17,474)   (16,860)   (34,378)   (34,144)
    Consolidated income before income tax expense $ 8,221   7,773   14,377   10,174